In battle: When an opponent or ally uses a held Berry or a held one-time use item, Pokémon with Pickup gain the used Berry or item if they are not already holding an item. A Pokémon with Pickup can also gain an item thrown at it using Fling. In Double and Triple Battles if more than one Pokémon have Pickup, then only the faster Pokémon will pick up used items.
Outside of battle:Pickup allows the player to receive free items. After a battle, any Pokémon on the team that has this Ability and is not already holding an item has a 10% chance of picking up an item, even if the Pokémon wasn't used in battle. It can be retrieved through the normal means of taking a held item.
Source: http://bulbapedia.bulbagarden.net/wiki/Pickup_(Ability)
Hope I helped!
